Citibank 2014 Annual Report Download - page 217

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15. LOANS
Citigroup loans are reported in two categories—consumer and corporate.
These categories are classified primarily according to the segment and
subsegment that manage the loans.
Consumer Loans
Consumer loans represent loans and leases managed primarily by the
Global Consumer Banking businesses in Citicorp and in Citi Holdings. The
following table provides information by loan type for the periods indicated:
In millions of dollars 2014 2013
Consumer loans
In U.S. offices
Mortgage and real estate (1) $ 96,533 $108,453
Installment, revolving credit, and other 14,450 13,398
Cards 112,982 115,651
Commercial and industrial 5,895 6,592
$229,860 $244,094
In offices outside the U.S.
Mortgage and real estate (1) $ 54,462 $ 55,511
Installment, revolving credit, and other 31,128 33,182
Cards 32,032 36,740
Commercial and industrial 22,561 24,107
Lease financing 609 769
$140,792 $150,309
Total Consumer loans $370,652 $394,403
Net unearned income (682) (572)
Consumer loans, net of unearned income $369,970 $393,831
(1) Loans secured primarily by real estate.
Citigroup has established a risk management process to monitor, evaluate
and manage the principal risks associated with its consumer loan portfolio.
Credit quality indicators that are actively monitored include delinquency
status, consumer credit scores (FICO), and loan to value (LTV) ratios, each as
discussed in more detail below.
Included in the loan table above are lending products whose terms may
give rise to greater credit issues. Credit cards with below-market introductory
interest rates and interest-only loans are examples of such products. These
products are closely managed using credit techniques that are intended to
mitigate their higher inherent risk.
During the years ended December 31, 2014 and 2013, the Company sold
and/or reclassified to held-for-sale $7.9 billion and $11.5 billion, respectively,
of consumer loans. The Company did not have significant purchases of
consumer loans during the year ended December 31, 2014. During the year
ended December 31, 2013, Citi also acquired approximately $7 billion of
loans related to the acquisition of Best Buy’s U.S. credit card portfolio.
Delinquency Status
Delinquency status is monitored and considered a key indicator of credit
quality of consumer loans. Principally the U.S. residential first mortgage
loans use the Mortgage Banking Association (MBA) method of reporting
delinquencies, which considers a loan delinquent if a monthly payment has
not been received by the end of the day immediately preceding the loan’s
next due date. All other loans use a method of reporting delinquencies, which
considers a loan delinquent if a monthly payment has not been received by
the close of business on the loan’s next due date.
As a general policy, residential first mortgages, home equity loans and
installment loans are classified as non-accrual when loan payments are
90 days contractually past due. Credit cards and unsecured revolving loans
generally accrue interest until payments are 180 days past due. Home equity
loans in regulated bank entities are classified as non-accrual if the related
residential first mortgage is 90 days or more past due. Mortgage loans in
regulated bank entities discharged through Chapter 7 bankruptcy, other
than Federal Housing Administration (FHA)-insured loans, are classified as
non-accrual. Commercial market loans are placed on a cash (non-accrual)
basis when it is determined, based on actual experience and a forward-
looking assessment of the collectability of the loan in full, that the payment
of interest or principal is doubtful or when interest or principal is 90 days
past due.
The policy for re-aging modified U.S. consumer loans to current status
varies by product. Generally, one of the conditions to qualify for these
modifications is that a minimum number of payments (typically ranging
from one to three) be made. Upon modification, the loan is re-aged to
current status. However, re-aging practices for certain open-ended consumer
loans, such as credit cards, are governed by Federal Financial Institutions
Examination Council (FFIEC) guidelines. For open-ended consumer loans
subject to FFIEC guidelines, one of the conditions for the loan to be re-aged
to current status is that at least three consecutive minimum monthly
payments, or the equivalent amount, must be received. In addition, under
FFIEC guidelines, the number of times that such a loan can be re-aged is
subject to limitations (generally once in 12 months and twice in five years).
Furthermore, FHA and Department of Veterans Affairs (VA) loans are modified
under those respective agencies’ guidelines and payments are not always
required in order to re-age a modified loan to current.